State must fix tax cap’s glitches

Posted
Thursday, January 30, 2014 3:37 pm

In budget discussions this month, officials from the Valley Stream Central High School District said they might need a supermajority — at least 60 percent of voters — to pass the budget in May, even if they ask for no tax increase. This requirement seems unjust, and must have more to do with a technical oversight in the tax-cap law than budgetary prudence.

The anomaly is the result of the tax-cap legislation, which went into effect for school districts and municipalities in 2012. It is designed to curb out-of-control property taxes in New York state by limiting tax increases each year.

While it is known as the “2 percent tax cap,” it is never exactly that. Each school district must follow an 11-step formula to calculate its tax cap, which considers factors such as debt and pension costs. Just one part of the formula is a natural allowance for budget growth, which is 2 percent or the consumer price index, whichever is lower.

In calculating its allowable tax levy increase for next year, the high school district ended up with a negative number, meaning any that tax levy equal to or higher than this year’s will exceed the cap. This happened because a $3 million annual bond payment will come off the books next year.

The district has paid off its debt, and is essentially being punished for doing so. It will now have that $3 million to spend on educational programs, but because the tax-cap formula factors in capital costs, the repurposing of that money affects the calculation.

It’s good that New York state has taken measures to control property taxes. The tax cap has gotten mixed reviews since it was implemented. Homeowners generally like it because it is a vehicle to keep spending and taxes in check. School officials mostly dislike it because it limits their ability to raise revenue, and often means that cuts must be made to cover the cost of unfunded mandates.

Many see it as a tool of last resort to force school districts and municipalities (which are also subject to the cap) to reverse their thinking process: instead of deciding what’s needed and telling taxpayers what they must pay, the new idea is to start with a “small” increase in what taxpayers paid the year before and telling districts to spend only what the taxpayers can afford.

The law clearly has unintended negative consequences, and it needs to be fixed. We want school officials to continue to be prudent in their budgeting, and to keep tax increases as low as possible. But their hands shouldn’t be tied, either, by technicalities that can spell doom for even a well-thought-out budget.

Right now, high school officials are considering a budget with a tax levy increase below 1 percent. To require a supermajority of voters to pass it isn’t in keeping with the spirit of the law, which is supposed to encourage responsible budgeting.

The district has been making budget cuts for several years. It is at the point where the cuts are starting to hurt, and any further reductions will start to have a negative effect on education. State aid simply doesn’t keep up with the costs of the mandates the state hands down.

We call on Assemblywoman Michaelle Solages, Assemblyman Brian Curran and State Sen. Dean Skelos, who all represent parts of the Central High School District in Albany, to look into reforming the tax-cap law so these technicalities are corrected. In additional to holding districts to a maximum tax increase, perhaps there should be a provision that at least gives school districts a bottom number.

This isn’t the first time the tax cap has caused issues with a Valley Stream budget. In 2012, a voter-sponsored bus referendum required District 13 to get at least 60 percent of the public vote to pass its tax-cap-compliant budget even if the referendum was rejected, which it was.

Our local state lawmakers need to examine these flaws in the law and make the necessary corrections. We hope our local school officials will urge them to, as well.